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Metinvest Q2 output plummets YOY on loss of eastern assets

Metinvest BV's second-quarter crude steel output declined year over year to about 1.9 million tonnes from 2.2 million tonnes, impacted by the loss of assets to separatist fighters in east Ukraine, the company said in its production results on Aug. 2.

The company's Yenakiieve Iron and Steel works were seized by the breakaway forces of the self-proclaimed independent republics of Donetsk and Luhansk in March. As a result, the company lost control of the enterprise and production dropped to zero in the second from 450,000 tonnes of steel a year ago.

Metinvest has tried to pick up the shortfall in production by ramping up operations at Azovstal and Ilyich Iron and Steel Works. A scheduled overhaul at blast furnace number 3 at Ilyich drove a year over year increase in hot metal production to 1.1 million tonnes from 926,000 tonnes, while Azovstal saw its output increase to 945,000 tonnes from 874,000 tonnes.

Iron ore concentrate production also suffered in the second quarter, falling to about 7.0 million tonnes from 7.9 million tonnes a year ago, which the company attributed to a drive to catch up with overburden removal work.

The loss of the Krasnodonugol facility in March was a defining factor coal output falling to 654,000 tonnes from 781,000 tonnes.

Metinvest previously told S&P Global Market Intelligence in written correspondence that the company was doing everything in its power to regain control of its seized facilities in the east of Ukraine.

"For Metinvest, the current situation means a loss of EBITDA, however we currently unable to name an exact figure," said the head of Metinvest's Press Department on July 20.

He added that the seizure of Metinvest's facilities will have a knock-on effect on Ukraine's tax income, as Yenakiieve and Krasnougol alone paid 1 billion hryvnia in taxes in 2016.

"In our view, the greatest loss for Ukraine is the fact that around 20,000 people worked at those facilities. We offered jobs to these workers at other Metinvest facilities, but, so far, not very many [over 500] have agreed to transfer," he said.

The metals and mining industry in Ukraine has been severely impacted by the ongoing conflict in the country's embattled East. A transport blockade at the beginning of 2017 and subsequent seizure of industrial assets by separatists forces will cost Ukraine US$1.3 billion in export revenue, according to data from the Ukrainian National Bank.

As of Aug. 1, US$1 was equivalent to 25.85 Ukrainian hryvnia.